New 14 Percent VAT Step Canceled in Iceland Skip to content

New 14 Percent VAT Step Canceled in Iceland

The controversial new 14 percent value added tax (VAT) step which the Icelandic government had planned to introduce to sugared beverages, among other sugared products, as part of extensive taxation changes was canceled before the end of last year.

The government offices. Photo by Páll Stefánsson.

Yet executives of the brewery and soda factory Ölgerdin, which had criticized the new 14 percent VAT, will not revoke the more than 30 layoffs they announced in November, Morgunbladid reports.

“A sugar tax was introduced on September 1 and it hasn’t changed. The alcohol tariff has recently increased by ten percent and by 42 percent in one year and that hasn’t changed,” said CEO of Ölgerdin Andri Thór Gudmundsson.

A representative of the Commissioner of the Inland Revenue suggested that the reason for the layoffs was not higher taxes and increased tariffs but the company’s debt position.

Morgunbladid reported in early December that Ölgerdin had owed ISK 15.3 billion (USD 122 million, EUR 85 million) at the end of February 2009.

Gudmundsson dismissed the Commissioner of the Inland Revenue’s claim. “The only reason for the layoffs is the poor working environment created by the government with more taxation steps and higher taxes on our products,” he told news website Eyjan.

Gudmundsson said it is pleasing that the new 14 percent VAT step has been canceled. “But now we just have to wait and see how the demand develops.” December was disappointing in terms of demand, he added.

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